Hyun-joo noona briefly explained the situation.
If financial assets are represented by stocks and bonds, tangible assets are led by oil and gold.
Before the financial crisis, oil prices nearly reached $150 per barrel. But after the crisis, economic growth slowed, demand decreased, and prices fell.
What accelerated this was the development of shale gas and shale oil in the United States.
It had long been known that shale rock contained gas and oil. However, due to cost and technical limitations, extracting it was impossible.
But with persistently high oil prices exceeding $100 per barrel and the advent of new technologies, extraction became feasible.
American companies began breaking into shale rock to extract the gas and oil within—and the quantities were staggering.
It was nothing short of a shale revolution.
"Do you know what the three major types of crude oil in the world are?"
I remembered learning this in my global economics class.
"Brent Crude from the North Sea, Dubai Crude from the Middle East, and West Texas Intermediate, right?"
For reference, Korea primarily imports Dubai Crude.
Hyun-joo noona smiled and nodded.
"Correct. As you can see from that, the U.S. has always been an oil-producing country. However, the production was so insufficient to meet domestic demand that, despite being a producer, the U.S. was also the largest oil importer. But the shale revolution completely changed that."
The amount of shale gas and oil produced by the U.S. was enough to transform the world's largest oil importer into an exporter.
Naturally, the traditional oil-producing countries were thrown into turmoil.
Oil demand is inelastic. Higher prices don't significantly reduce consumption, and lower prices don't drastically increase it either.
Thus, oil prices had historically been supplier-driven.
OPEC functioned as a de facto cartel on a global scale. Every time they colluded, oil prices fluctuated wildly, leading to the first and second oil shocks.
Now, a new supplier—the U.S.—was entering the market from outside the cartel.
Gone were the rosy forecasts of oil exceeding $200 per barrel. Prices plummeted endlessly.
Since demand was fixed, the only way to raise prices was to reduce supply.
OPEC countries scrambled to hold meetings to agree on production cuts, but they always failed.
"The interests of the oil-producing countries are too complex and conflicting," Hyun-joo noona said.
The biggest downside of shale oil is its high cost.
The estimated production cost is around $45 per barrel. If prices fall below $50, more than half of the companies could face bankruptcy.
"Countries like Venezuela, which are on the brink of starvation, are desperate to cut production to prevent further price drops, but countries like Saudi Arabia, with massive reserves, are taking a wait-and-see approach. Their thinking is, let's endure the low prices for now—after all, the low prices will hurt shale companies too."
"What do you think will happen at this meeting?" I asked.
"Most likely, they'll fail to reach an agreement. Oil prices are barely holding at $60 per barrel now. If they fail again, prices could drop below $50. That's why the big players are already betting on that outcome. Just this week, WTI (West Texas Intermediate) has fallen more than 8%."
While excessively high oil prices are problematic, excessively low prices are equally damaging. In the current situation, falling prices are hurting the economy.
"What if they reach an agreement?"
"Oil prices will skyrocket, and the market will celebrate... but the chances are slim."
"It'll happen this time," I blurted out.
Hyun-joo noona looked at me with curiosity.
"Why do you think so?"
I had spoken without thinking.
I quickly dodged, "Oh, I just think it would be nice if it did."
Hyun-joo noona gave a wry smile.
"Sure, that'd be nice, but hope and predictions aren't the same."
Just as the conversation ended, Hyun-joo noona 's phone buzzed again.
Bzzzz!
After checking the message, she stood up.
"They're ready. I have to go now for work. See you next time. Jin-hoo, make sure you take care of him."
"Don't worry," I said.
Tae-kyu grumbled, "I'm the one taking care of Jin-hoo, not the other way around. You don't even know what you're talking about."
On the way back, we got into the car.
As Tae-kyu drove, I couldn't stop thinking about what I had seen earlier.
What does OPEC agreeing to production cuts mean?
"..."
Obviously, it means they'll agree to reduce production, right?
If they do, oil prices will surge. Even without Hyun-joo noona's explanation, that much was common sense.
A thought suddenly struck me.
What if I buy oil in advance?
If this really is foresight and what I saw is accurate, buying oil now could yield enormous profits.
Oh, I might actually be onto something here.
I took a moment to think it through.
I predicted the mortar explosion. I predicted the MountainHill bankruptcy. By inductive reasoning, the OPEC production cut should happen too. (Let's worry about the flaws of inductive reasoning later.)
The problem is the investment capital.
After securing a new home and giving my mom 100 million won, I had 275 million won left in my account. I also had the 740 million won still owed to me by Tae-kyu.
Should I invest all of it?
As I considered this, Tae-kyu spoke up.
"Hey, did you see something earlier when you were talking to my sister?"
"Huh?"
"You saw something, didn't you? What was it? What did you see?"
"..."
Why is this guy so perceptive when it's unnecessary?
Wait—this guy has over ten times as much money as I do.
I turned to him and asked, "Hey, have you ever thought about buying oil?"
He looked confused.
"Oil? Like gasoline? My tank's already full."
"No, not filling up your car..."
I explained what I had seen and the idea that had just come to me.
After hearing me out, he looked stunned.
"So you foresaw OPEC agreeing to production cuts, which would make oil prices rise, and you're saying we should buy oil in advance?"
"Exactly."
Thankfully, he caught on quickly.
"But where would we store the oil? Are we going to stack barrels at home?"
"..."
Okay, maybe not completely caught on.
We arrived at Tae-kyu's apartment in Yeoksam-dong.
The moment we got inside, he pushed aside the bowls cluttering his desk and turned on his computer. He opened an internet browser and immediately searched for WTI.
Despite producing large amounts of oil, U.S. production barely meets domestic demand. Even if trades occur, the oil rarely leaves the country.
However, thanks to its advanced financial market, the U.S. plays a key role in determining global oil prices.
As Hyun-joo noona had said, WTI was barely holding at $60 per barrel—specifically, $60.48.
"It's fallen a lot."
Oil isn't just used to fuel cars; it's essential across industries. Rising oil prices significantly impact producer prices.
When my dad ran a factory, he struggled with oil prices exceeding $100 per barrel. It's surprising how much they've dropped in just a few years.
The shale revolution really is something.
Tae-kyu logged into his Golden Gate account. Despite transferring 5 billion won to me, he still had a balance of $11,932,000. Around $673,000 of that was technically mine.
"WTI? Where do you buy that?"
"The New York Mercantile Exchange."
He looked excited.
"How much are you planning to buy?"
I thought about it. To play it safe, maybe I should only invest half.
"$300,000."
"Then let's buy some for me too."
"How much are you putting in?"
"Maybe 1,000?"
"1,000... won?"
"No, dollars."
"..."
"...or maybe $5,000,000?"
"Are you insane? How is that reasonable?"
"Okay, $3,000,000. That's the lowest I'll go."
"...Do whatever you want."
The market was already predicting the OPEC meeting to fail, and the price drop was factored in. Even if the meeting failed, the additional decline wouldn't be significant.
If I'm wrong, we can sell at a small loss.
I logged into Tae-kyu's account and purchased WTI.
It sounded simple, but $3.3 million is an amount unimaginable to most people. My hands trembled as I clicked the "buy" button.
"What now?" he asked.
"We wait for the OPEC meeting to end."